Saturday, 26 September 2009

One of the things I find when people criticise either is that when you talk to them about their criticisms, you frequently find that it has nothing to do with capitalism (or free markets), and that government is more frequently the problem.

Reading an article about Michael Moore's new film Capitalism: A Love Story reminded me of this:-

alongside the corporations (including Wal-Mart and Amegy Bank) which take out insurance policies on their employees and cash in big when they die young. These ghoulish derivatives go by the charming name of "dead peasants" insurance – which says it all, really.

Now, this sparked my interest because I've heard of employee insurance policies which fit into the pattern of "derivatives", in terms of offsetting risk. Imagine a fragrance company - they employ a small number of highly paid, very skilled perfumers. If one of them drops dead prematurely, it could have a major effect on the operation of the business. Now, it's not likely to happen, so the insurance is very cheap. But it offsets some risk.

The thing is that companies don't generally bother for regular staff. It's not worth it. The impact of 1 shelf stacker dying young isn't that great on the profits.

But I found this on Everything2 (a bit like Wikipedia):-

Described as, " A product actively marketed by the insurance industry as an 'attractive, off-balance-sheet asset,'" so far it's been the source of an estimated $6 billion in lost tax revenue to the U.S. Treasury annually and the subject of several pending tax court cases.

So, it's really not about "capitalism", or the free market. It is instead about government and how they create labyrinthine tax rules (often to either please lobbies or to bury how much tax you are paying) and then companies exploit them. Simplify the tax system so that businesses can't bury away money in various ways and this will stop.